Biomerica Inc

Biomerica Inc (NASDAQ-CM: BMRA) is a Health Care Equipment & Services Company. The Company is engaged in the business of developing, manufacturing and marketing of medical diagnostic products used for monitoring and detecting medical conditions and chronic diseases.

Investment Highlights - Biomerica Inc – Speculative Buy at USD 6.16

• Despite the lower financial performance in the first half of the financial year 2021, the Company is focused on driving growth across the platform and executing business objectives.
• In the last one month, the Company delivered a substantial return of ~20.08% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, EV/Sales and EV/EBITDA multiples of the Biomerica Inc are currently lower as compared to the corresponding multiple of the Healthcare Equipment & Supplies industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average prices (USD 5.39), which reflects an uptrend in the stock and can move up further.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The covid-19 outbreak has resulted in supply chain disruptions which will have a negative impact on the Company’s performance.

Financial Highlights – Q2 & H1 FY2021 (30 November 2020) (released on 14 January 2021)

(Source: Quarterly Report, Company Website) 

• In the second quarter and first half of the financial year 2021, due to lower revenue from Asia, the Middle East and other, the total revenue declined.
• Due to lower revenue and higher operating expenses for the period, the net loss increased for Q2 and H1 FY2021.
• The cash balance as on 30 November 2020 declined to $5,683,787 (31 May 2020: $8,641,027).
• The cash flow from operating and investing activities remained in the negative zone, while generated positive cash flow from financing activities and was lower than last year data for the same period.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the second quarter and the first half of the financial year 2021. Both the revenue and bottom-line performance declined, while the loss for the period increased. The Company has operations in multiple locations and did not face any foreign currency loss during the period. The Company is currently focused on research, development and clinical trials of covid-19 related products and is also selling products related to food intolerances, gastrointestinal diseases, certain esoteric tests and diabetes. Biomerica’s operational performance was not materially impacted by the impact of the covid-19 pandemic, while it resulted in the delay in clinical trials, increased costs and disruption in the supply chain. The Company has also granted a patent in the US, Korea, Japan and Singapore for InFoods® IBS product. The stock made a 52-week low and high of USD 2.05 and USD 23.39, respectively.

Based on the above rationale, we have given a “Speculative Buy” recommendation on Biomerica Inc at the closing price of USD 6.16 (as on 20 January 2021).

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